Inventory

Question 1

FIFO Valuation

Answer 1

Ending Inventory reflects latest costs.

CGS reflects earliest costs.

Question 2

LIFO Valuation

Answer 2

Ending inventory reflects earliest costs.

CGS reflects latest costs.

Question 3

Dollar-value LIFO

Answer 3

Takes a company’s ending inventory in FIFO dollars (usually) and converts them to LIFO dollars. This reduces the impact of LIFO liquidation problem.

Question 4

Valuation of Inventory Pools

Answer 4

Assigning value to items grouped by similarity so that all inventory items don’t need to be valued at the same time

Question 5

Inventory pool conversion index calculation

Answer 5

Conversion index = Ending inventory in current-year dollars divided by Ending inventory in base-year dollars

Question 6

Ending DV LIFO Inventory

Answer 6

BOY DV LIFO Inventory + Current year layer

Question 7

Steps to calculate ending DV LIFO Inventory

Answer 7

1. Convert EOY Inventory to base-year dollars
2. Determine the increase in inventory at base-year prices
3. Convert the increase in inventory to current-year prices

Question 8

Lower Cost or Market

Answer 8

Market value is the middle figure in a range, subject to a ceiling & a floor.
Range includes:
Replacement Cost
Ceiling = NRV; NRV = selling price - cost to complete sale
Floor = NRV - normal profit margin